Lloyd's terror bill set to top £6.6bn

THE total insurance claim facing Lloyd's of London from the terrorist attacks in the US will be at least $9.5bn (£6.6bn), five times more than the net figure the insurance market revealed last week, according to weekend reports.

The gross figure is likely to fuel fears that Lloyd's insurers will struggle in the time lag between paying claims and recovering money through reinsurance, There are also fears about the strength of the Lloyd's reinsurers.

The Lloyd's market, which will pick up the bill for a fifth of the cost of the damage to the twin towers, expects to be left with a bill totalling £1.3bn after it has reclaimed money from its reinsurers.

The market will not reveal the scale of claims it expects to receive before it starts to recoup reinsurance money. But chairman Sax Riley said 90% of syndicate reinsurance was with blue-chip companies and should be recoverable.

The enormous size of claims will almost certainly mean some less secure insurers and reinsurers are forced out of business, casting doubt on Lloyd's ability to recover the remaining 10%. Further cash calls are likely and Lloyd's might be forced to use its 'last resort' central fund - a pool of money used to meet claims if Lloyd's backers cannot pay.

Lloyd's sought to restore the fund on Friday, raising it to $1bn from $330m by increasing its levy on members. Riley said the move was a 'sensible precaution, adding that Lloyd's has £18bn it can call on and is confident it will ride out the biggest claim in its 300-year history. He denied the move meant syndicates would not be able to pay claims, though he admitted some business failures were 'possible'.

Several syndicates at Lloyd's have started to send out letters demanding cash from their backers. It is estimated that the 2,800 wealthy individuals who participate in the market could face bills averaging £75,000. The market will also force syndicates to pay 2% of their premiums into its central fund.

Lloyd's insurers were preparing to open their Lime Street underwriting room today - the first time on a Sunday since the Gulf war - to organise emergency cover for high-profile US properties. The world's two biggest insurance brokers, Aon and Marsh, were said to be scrambling to finalise a package of insurance cover for businesses and individuals in America after the chaos caused by the attacks.

Underwriters, who have already handed over multi-million dollar cheques to American Airlines and United Airlines to cover the cost of the four Boeing aircraft that were crashed, have been seeking big increases in premiums for high-profile properties. The Lloyd's market is also thought to be trying to exclude terrorist risks from some of the insurance cover it provides.